Theranos might find itself homeless soon. A federal agency plans to force founder Elizabeth Holmes out of her blood analysis startup for two years and take away the California lab’s federal license.
First reported in the Wall Street Journal, the Centers for Medicare and Medicaid Services sent a letter dated March 18 proposing sanctions barring Holmes and company president Sunny Balwani from owning or running operations in labs for at least two years – including in both California and Arizona – and taking away federal licensing for Theranos’ California facilities in Newark and Palo Alto after Theranos’ continued failure to correct major problems with accuracy and competence.
These actions would be a major financial blow to the startup valued at $9 billion. Theranos has the runway to keep working with approximately $700 million in the bank but the two labs make a good portion of the money for Theranos’ operations and a loss of the founder and president would strangle any hope of recovery.
The letter has not been released to the public, but you can view a copy given to the WSJ here.
CMS gave Theranos 10 days to comply from the time the letter was issued (several weeks ago).
Between June 1st and September 21st, Theranos failed to properly hire and train qualified people to run the machines, allowed unlicensed workers to review patient test results, failed to follow manufacturer’s instructions on equipment and did not have a proper, written protocol in place to calibrate the machines to maintain accuracy.
Theranos submitted a plan of correction in February but the March 18 letter from CMS indicates it was not satisfied with the actions Theranos has taken so far.
Last week Theranos told TechCrunch it had submitted a plan to CMS to correct the problems, including hiring a new lab director in its Newark facility.
Theranos now must convince federal regulators it has taken the necessary steps needed and to not impose the penalties associated (a fine of up to $10,000 per day) for non-compliance.
According to Theranos spokesperson Brooke Buchanan, CMS has not imposed sanctions at this time and has already responded to the March 18th letter within the ten-day timeframe required.
“This is normal practice, normal process,” Buchanan told TechCrunch. “But this is all hypothetical until if and when Theranos receives sanctions.”